Deep Dive: Lithium Virtual Reality
At first, I was writing this under the "stuff I'm reading" section at the end part of the newsletter (always gold lithium there). But it's important and... I'm worried.
We see all these new gigafactories announced every other week with great capacity promises.
And this is great, because we need that capacity.
The thing is, battery capacity can be built up much faster than lithium projects that feed 'em. It can take almost a decade for a mining project to reach its nameplate capacity. A decade.
And due to the lack of investment in new supply in previous years (and massive red tape), we are on the road to a structural deficit of lithium supply in the coming years.
Joe Lowry, aka Mr. Lithium, wrote an overview on the state of Lithium supply called "Lithium: Virtual Reality" (5pp, link). I'd bring out two resonating points of his article here.
The first one hits direct, in the light of the recent announcements (example: the announcements we recently covered about Ford):
Many OEMs seem to have adopted the strategy that signing multiple supply agreements with companies that do not have a clear path to production is the new form of hedging their supply risk.
[...] OEM's that just a couple of years ago believed lithium supply was "the battery supplier's problem" are now in full-fledged panic as evidenced by the plethora of recently signed 'virtual lithium supply agreements'.
And the second one explains why we are at a deficit in the first place:
Unfortunately, lack of investment in brine, hard rock, and sedimentary projects over the past five years by those at the downstream end of the supply chain (read: OEMs and the larger battery companies) has caused the current lithium chemical supply shortage that will last into the next decade.
The Lithium Deficit Road Map by SPGlobal says the supply should not reach the expected 2 million mt demand by the end of the decade. (link)
SPGlobal argues that lithium is still getting less funding than required — and such investment could be too late to prevent a structural deficit in the coming years.
We do have the upcoming direct lithium extraction (DLE) possibilities along with assets like mining clays and extraction from geothermal brines, but these are yet to be proven to work on a commercial scale. And as far as I've seen, most promise the earliest commercial results in 2025 and forward.
Expect me to rant more on this. And trying to identify all of our potential bottlenecks towards an all-EV future, really.
Meanwhile, I'll sum up all 386 words here with one meme I made recently:
I'm the king of bad jokes, I know.
